BILL ANALYSIS                                                                                                                                                                                                    



                                                          SB 565
                                                          Page  1

SENATE THIRD READING
SB 565 (Costa)
As Amended August 23, 1999
Majority vote 

  SENATE VOTE  :33-2  
  
 CONSUMER PROTECTION 8-0         APPROPRIATIONS      21-0        
  
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|Ayes:|Davis, Leach, Correa,     |Ayes:|Migden, Brewer, Ackerman, |
|     |Cox, Lempert, Machado,    |     |Ashburn, Battin, Cedillo, |
|     |Maddox, Wesson            |     |Davis, Hertzberg, Kuehl,  |
|     |                          |     |Maldonado, Papan, Romero, |
|     |                          |     |Runner, Shelley,          |
|     |                          |     |Steinberg, Thomson,       |
|     |                          |     |Wesson, Wiggins, Wright,  |
|     |                          |     |Zettel, Longville         |
|     |                          |     |                          |
 ----------------------------------------------------------------- 
  SUMMARY  :  Requires the Director of the Department of General  
Services (DGS) to study the purchase, exchange, or acquisition  
of real property and the construction of facilities in the  
County of Fresno for the Department of Transportation (Caltrans)  
and other state agencies.  Specifically,  this bill  :  

1)Requires the study to include an evaluation of options to  
  finance the facilities.

2)Requires DGS to consider placing the facilities on a site that  
  permits future expansion of the facilities if evaluations of  
  future workload indicate that future expansion of the  
  facilities may be warranted.

3)Requires the study to assume that the cost of purchasing and  
  operating these facilities may not exceed the cost of leasing  
  and operating an equivalent amount of comparable office space  
  over the same time period.

4)Requires the Director of DGS to submit the study to the  
  Legislature by December 31, 2000.

5)Sunsets January 1, 2001.

  EXISTING LAW  authorizes the Director of DGS to hire, lease,  








                                                          SB 565
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lease-purchase, or lease with the option to purchase any real or  
personal property for the use of any state agency, if the  
director deems the hiring or leasing is in the best interest of  
the state.

  FISCAL EFFECT  :  According to the Assembly Appropriations  
Committee analysis, minor, absorbable costs to DGS to complete  
the study by January 2001 as required by this bill.

  COMMENTS  :   

1)According to the author, this bill is part of an effort to  
  bring activity back to downtown Fresno while simultaneously  
  assisting Caltrans in improving its internal efficiencies.   
  This bill would provide DGS with the necessary authority to  
  proceed with the consolidation of state agencies in the County  
  of Fresno.  The author would like the state to build a new  
  multi-tenant state building in the downtown core to help  
  revitalize Fresno's central business district.  

  The author believes that the economic criteria that DGS has  
  used to justify new multi-million dollar state office projects  
  in major metropolitan areas may not be feasible for  
  "secondary" metropolitan areas.  The Legislature and the  
  Administration may need to develop alternative justification  
  criteria to address future state office needs in smaller  
  cities.

2)Justification for new state projects in major metropolitan  
  areas (e.g., the new multi-tenant and headquarters office  
  consolidation projects in Los Angeles, San Francisco,  
  Sacramento, San Diego and Oakland) has focused on the economic  
  benefits of ownership compared to the avoided cost of leasing.  
   The enabling legislation for these new projects has generally  
  stipulated that the state's development must show a cost  
  savings when compared to the avoided cost of leasing a similar  
  quantity of leased space over the term of the project  
  financing.

  DGS owns multi-tenant state office buildings in Redding, Red  
  Bluff, Stockton and Fresno that are approximately 30 plus  
  years of age.  According to DGS, state tenants in these  
  buildings are paying lease rates that are considerably more  
  than privately own leased space in these communities.  Not  
  only are the rents higher in the state office buildings, but  








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  the conditions of older state-owned facilities are generally  
  less desirable than those in the newer, privately owned  
  facilities.  DGS contends that it is unlikely that a new  
  multi-tenant office building project financed with debt will  
  ever compare favorably to market rents for leased space in  
  most secondary metropolitan areas.
  

Analysis Prepared by  :  Robin Hartley / C.P., G.E. & E.D. / (916)  
319-2089 


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